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Nvidia announced its financial results on Thursday, and they were spectacular. For the company's first fiscal quarter—which runs from late January through late April—the company had revenues of $3.2 billion. That's up 10 percent from the previous quarter and up 66 percent over the last year. Profits were even more impressive, rising 11 percent from the previous quarter and 145 percent from a year earlier.

A big reason for this: the soaring value of ether and other cryptocurrencies in recent months created a ton of demand for graphics cards to mine them. That surging demand caused the street price of some high-end graphics cards to more than double between mid-2017 and February 2018.

Further Reading

It's a sensitive subject for major graphics-card makers because their most important market in the long run is gamers, not miners. Gamers don't like the idea of graphics-card makers raking in big profits from inflated prices driven by mining demand.

"Cryptocurrency demand was again stronger than expected, but we were able to fulfill most of it with crypto-specific GPUs, which are included in our OEM business at $289 million," said Nvidia CFO Colette Kress in Thursday's earnings call. "As a result, we could protect the vast majority of our limited GPU supply for use by gamers."

That $289 million figure is already almost 10 percent of Nvidia's revenue. And it likely understates the impact of cryptocurrency on Nvidia's bottom line. If an individual consumer buys a graphics card at retail, there's no way Nvidia can know if it's being used for gaming, mining, or some other purpose. And even if the rest of Nvidia's graphics cards went exclusively to gamers, the cryptocurrency-induced shortages helped to push up the average price—and therefore profitability—of all graphics cards Nvidia sold.

The story has been similar for Nvidia's main graphics card rival AMD, which released first-quarter results a few weeks ago. AMD announced record revenues and profits, with revenues up 23 percent since last quarter and 40 percent over a year earlier. AMD earned an $81 million profit in the first quarter of 2018, compared to a $19 million loss the previous quarter and a $33 million loss in the first quarter of 2017.

AMD says that cryptocurrency-related sales accounted for about 10 percent of overall revenue, which again could be understating its impact on AMD's profits.

GPU makers’ blockchain bonanza might be over soon

Cryptocurrency values have been falling in recent months, and graphics cards have been following along with it. GPUs haven't quite returned to "normal" values last seen a year ago, but they're a lot cheaper than they were earlier this year.

On Thursday, Nvidia said it was projecting next quarter's cryptocurrency-specific revenue to be a third what it was in the first quarter.

Further Reading

AMD didn't provide a specific projection for blockchain-related revenues in the second quarter, but a company spokesman said last month that he expected blockchain revenue to be a "mid-to-high single-digit percentage" of revenue for all of 2018—again, suggesting that the rest of the year will be significantly below the first-quarter sales.

If cryptocurrency prices continue to fall, that could have dire consequences for GPU makers. If cryptocurrency prices fall low enough, we won't just see miners stop buying new GPUs. We could start to see them selling the graphics cards they already have on the secondary market. The resulting graphics-card glut could push graphics-card values well below MSRP, which would be great news for gamers but bad news for companies trying to sell new GPUs.

But in last month's earnings call, AMD president Lisa Su said she wasn't worried about this scenario. "There are multiple currencies being used," she said. "People who are mining do go from one currency to another depending on what's happening."

In addition, she said, many customers buy graphics cards for both gaming and mining. They're likely to hold onto their cards for gaming purposes even if mining becomes unprofitable, she said.

But this analysis seems debatable. It's true that there are an abundance of cryptocurrencies, but there are only a few of them that are economically significant—Ethereum's ether is by far the most significant GPU-mineable one. And the prices of cryptocurrencies are strongly correlated. So if ether's value crashes, other cryptocurrency prices are likely to fall along with it.

And while there are definitely some people who buy graphics cards for multiple applications, there are also a lot of people who have bought a bunch of cards and put them into custom-built mining rigs. Those folks might hold onto one or two cards for gaming purposes, but if cryptocurrency prices fall far enough, many of those cards are going to wind up in the used GPU market. That could create a glut that will make it hard for AMD and Nvidia to sell new cards.

We could start to see them selling the graphics cards they already have on the secondary market. The resulting graphics-card glut could push graphics-card values well below MSRP, which would be great news for gamers but bad news for companies trying to sell new GPUs.

This is taking wishful thinking to absurd extremes. The secondary market for GPUs is extremely small and current "gamers" aren't exactly big on buying cards that were potentially used for mining. There's a ton of pent up demand available to balance out the drop to MSRP and it's not like the pre-crypto market was known for people always paying MSRP. There's a massive amount of demand that needs to be cleared before things make it back to pre-crypto levels.

Additionally, a big sell-off isn't likely amongst those running mining rigs anyway. Falls in currency value aren't going to have that impact. Now if miners start facing increases in marginal cost (say from utilities identifying them and increasing the cost of their electricity) that could potentially lead to a selloff of cards. Likewise, some sort of government crackdown or intervention could lead to that, but you're not going to see people throwing out capital goods with usable life left unless they're abandoning crypto entirely (unlikely without government intervention) or marginal costs rise to the point that it's no longer viable to be completed (which essentially can't occur globally unless the currencies themselves all change their structure or go insolvent).

I’m not terribly concerned for GPU manufacturers when crypto currencies finally fucking die. There’s two factors in their favor:

1) Used GPUs are always suspect, ESPECIALLY miner cards. You never know how close they are to dying. I’ve had as many GPUs die as I’ve bought and I’ve never mined, so yeah. I’m not gonna buy a miner card; neither will anyone I know. 2) The biggest profit margin for GPU manufacturers has always been the top end cards. Miners are using current gen cards, largely 1070’s and 580’s. If manufacturers simply put out the next gen when crypto crashes hard, rich gamer assholes like me will ignore amazing used deals to buy the best of the best anyway. Multi GPU support tends to suck so if you want the best experience, you need to buy that one fanciest card.

1) Used GPUs are always suspect, ESPECIALLY miner cards. You never know how close they are to dying. I’ve had as many GPUs die as I’ve bought and I’ve never mined, so yeah. I’m not gonna buy a miner card; neither will anyone I know.

Miner cards are usually downclocked to tune performance/watt, so I’d rather buy one of them than from a gamer.

[quote="[url=https://arstechnica.com/civis/viewtopic.php?p=35320493#p35320493]”]1) Used GPUs are always suspect, ESPECIALLY miner cards. You never know how close they are to dying. I’ve had as many GPUs die as I’ve bought and I’ve never mined, so yeah. I’m not gonna buy a miner card; neither will anyone I know.

Miner cards are usually downclocked to tune performance/watt, so I’d rather buy one of them than from a gamer.[/quote]

Downclocked and run in tightly packed rows of GPUs. Are you suggesting they’re not running hotter than normal GPUs, despite underclocking?

ASIC-resistant coins seemed like a good idea at the start. You know, democratize mining and prevent mining power from pooling into the hands of a few who have custom hardware for it.

In practice, all it did was make things much worse for 99% of regular consumers who want nothing to do with mining in the first place. First they took our GPUs, and because ASIC-resistant algorithms tend to need lots of RAM, it increased the demand for memory as well, bringing existing fabs to capacity and creating a shortage in supply which (in part) brings us to the sorry state of memory pricing we have now.

If an individual consumer buys a graphics card at retail, there's no way Nvidia can know if it's being used for gaming, mining, or some other purpose.

They actually have a decent way to do exactly that. If you're a gamer that's not using the GeForce Experience app then you're leaving a decent sized chunk of the featureset that the cards provide on the table. Since you need the app to get the latest drivers (IIRC, only the quarterly stable drivers are available sans app) as well that's even more reason to expect most Nvidia using gamers are running the app. If the app is installed then Nvidia has a call-home mechanism to tell exactly what the card is being used for.

They are understating intentionally though. They don't want to see a sharp rise in stock price due to the unsustainable effect of cryptocurrencies followed by a meteoric drop when cards stop selling to miners. That would happen if they came out saying "We got all the monies this quarter guys!" only to turn around in a year or so saying "We knew it would fall off and it did."

Downclocked and run in tightly packed rows of GPUs. Are you suggesting they’re not running hotter than normal GPUs, despite underclocking?

Well given that we have had SLI and crossfire for years how has anyone known that is not the case from non-miners? I mean it really is six of one half a dozen of the other and cards are designed to handle being ran as one of multiple to a box given that SLI is one of their features.

All in all it is no skin off my nose if you want to possibly wait another year or so to pay reasonable card prices. But because I went to a friend that was a miner I was able to get two reference model 1080ti’s for MSRP, and haven’t had one hiccup yet.

I’m not terribly concerned for GPU manufacturers when crypto currencies finally fucking die. There’s two factors in their favor:

1) Used GPUs are always suspect, ESPECIALLY miner cards. You never know how close they are to dying. I’ve had as many GPUs die as I’ve bought and I’ve never mined, so yeah. I’m not gonna buy a miner card; neither will anyone I know. 2) The biggest profit margin for GPU manufacturers has always been the top end cards. Miners are using current gen cards, largely 1070’s and 580’s. If manufacturers simply put out the next gen when crypto crashes hard, rich gamer assholes like me will ignore amazing used deals to buy the best of the best anyway. Multi GPU support tends to suck so if you want the best experience, you need to buy that one fanciest card.

Most miner cards are:

Ran at the same temperature for months at a time, avoiding the stresses of thermal expansion and contraction. Cycling things on and off is what kills lifespan, and gamers cycle their cards on every game.

Most miner cards are undervolted and underclocked:The miners care about dollar per watt, the best way to achieve that is to run the card below max specification. Gamers on the other hand push their cards to the limit, and are far more likely to overclock / overvolt to eck that last little bit of performance out of the card. Especially if they plan to ebay it soon because they know they are getting a new one.

Most miner cards are setup for reliability:Adequate cooling and high quality power supplies rule the day. When a miner loses a card, he is no longer making money off it. Dead silicon is a straight loss. To the miner, reliability is everything. The miner is far more likely to buy better then average system components to avoid premature failure. The gamer on the other hand is a random crap shoot, they may have bought a quality power supply, or maybe they bought a cheap one, or just went with what came with there case.

ASIC-resistant coins seemed like a good idea at the start. You know, democratize mining and prevent mining power from pooling into the hands of a few who have custom hardware for it.

In practice, all it did was make things much worse for 99% of regular consumers who want nothing to do with mining in the first place. First they took our GPUs, and because ASIC-resistant algorithms tend to need lots of RAM, it increased the demand for memory as well, bringing existing fabs to capacity and creating a shortage in supply which (in part) brings us to the sorry state of memory pricing we have now.

Right now I'm hoping Bitmain successfully makes ASICs for everything.

Aren't current memory prices primarily due to higher demand for flash and DRAM driven by smartphones? The trend is to cram more memory and storage into phones, so each phone needs more; on top of that, the smartphone market is still expanding. That was all happening before the crypto boom the last 8 months or so. RAM prices have been inflated for years now.

I thought increased demand due to GPUs (GDDR5) and ASICs was relatively minor in comparison.

If an individual consumer buys a graphics card at retail, there's no way Nvidia can know if it's being used for gaming, mining, or some other purpose.

They actually have a decent way to do exactly that. If you're a gamer that's not using the GeForce Experience app then you're leaving a decent sized chunk of the featureset that the cards provide on the table. Since you need the app to get the latest drivers (IIRC, only the quarterly stable drivers are available sans app) as well that's even more reason to expect most Nvidia using gamers are running the app. If the app is installed then Nvidia has a call-home mechanism to tell exactly what the card is being used for.

Pretty sure nvidia didnt follow through on that idea of forcing GFE for updates, you can go to their driver search page right now and you can download any update you want. I almost never use GFE for updates because Ive had it screw up 2 updates for me in the past and just dont want to do deal with it. So I always download directly from the site for a stand alone installer.

I also have plenty of friends who never install/use GFE because it offers no real benefits for them. Its only useful if you are using GFE's streaming capabilities, other than that most of the time their recommended settings are utter crap

If you're a gamer that's not using the GeForce Experience app then you're leaving a decent sized chunk of the featureset that the cards provide on the table. Since you need the app to get the latest drivers (IIRC, only the quarterly stable drivers are available sans app)

I don't see that any of this is correct. I don't use the app, and all drivers are available on the web site. The only "features" the app includes is better screenshots, Shadowplay, automatic Nvidia-messing-with-your-game-settings, and automatic drivers. None of those features were interesting enough to me to be constantly tracked.

The article completely fails to address the fact that mining difficulty increases in proportion to the increasing computing power, so mining will most likely never really become as profitable as it was a few months ago even if cryptocurrencies become three to four times as expensive as they currently are (which will take at least a year or two). Too many GPUs equal too much computing power equals too much of a difficulty equals low profits for everyone involved. The golden days of GPU mining are over and AMD's optimistic point of view is just unwarranted: the market will be flooded with cheap GPUs because they will soon drop below profitability levels or their ROI will become too long.

Right now the most profitable GPUs in terms of performance/price/ROI are GTX 1060 3GB and RX570 and they bring in just ~$30 a month on average, so it takes at least seven to ten months to break even with them. And some of them fail.

Gamers don't like the idea of graphics-card makers raking in big profits from inflated prices driven by mining demand.

I'm obviously not a market/business/GPU expert so I'm wondering, separate from increased demand, who is exactly benefiting from increased prices? That is, when is the price increase applied? Does NVIDIA increase their licensing fees to partner OEMs who build their cards? Do OEMs increase the price when selling to retailers? Are the retailers the ones increasing the price? I'm sure there are missing stages there but maybe everyone is increasing fees/prices at every stage?

If you're a gamer that's not using the GeForce Experience app then you're leaving a decent sized chunk of the featureset that the cards provide on the table. Since you need the app to get the latest drivers (IIRC, only the quarterly stable drivers are available sans app)

I don't see that any of this is correct. I don't use the app, and all drivers are available on the web site. The only "features" the app includes is better screenshots, Shadowplay, automatic Nvidia-messing-with-your-game-settings, and automatic drivers. None of those features were interesting enough to me to be constantly tracked.

Yea, as soon as I needed to create an account to get the "experience" and auto-update my drivers I uninstalled that shit. Now I just manually install once a month or so from the website versus have that crapware spying on me.

Well, if the selloff happens, it will be old gen cards.I am sure NV and AMD have some cards up their sleeve ;-)

Then again, someone pricing out an nVidia 1160 or 1170 card coming across a much cheaper old 1080ti might jump at the latter instead.

I was in exactly this position when I bought my last card. I tend to build mid-range units so I was considering a GTX 770 or 960 for my build and I found a used R9 290, which was almost certainly an old mining unit from the last crypto boom, and was being sold for less than the MRSP for either of the other units. I decided a 50% improvement in GPU performance was worth the risk and it's been running fine for over 3 years now.

Obviously used units aren't going to appeal to the type of PC gamer who's going to be looking at the best of the best cards (i.e. the 1170/1180) but used 10XX and 5XX cards could take a chunk out of the mainstream mid-range GPU market.

This analysis seems severely flawed. Crypto’s effect on GPU makers is wildly overstated. The effects are much more of a retail phenomenon and not a OEM one. When cards sell over MSRP the retailer rakes it in, not the manufacturer.

Revenue and profits are up at both manufacturers by far more than the effects of crypto would account for:

- Nvidia counts crypto sales in their OEM revenues: $289M out of $3,000M. So business up 60% but <10% overall revenue is from crypto. - AMD up ~30% with <10% overall revenue from crypto.

We could start to see them selling the graphics cards they already have on the secondary market. The resulting graphics-card glut could push graphics-card values well below MSRP, which would be great news for gamers but bad news for companies trying to sell new GPUs.

This is taking wishful thinking to absurd extremes. The secondary market for GPUs is extremely small and current "gamers" aren't exactly big on buying cards that were potentially used for mining. There's a ton of pent up demand available to balance out the drop to MSRP and it's not like the pre-crypto market was known for people always paying MSRP. There's a massive amount of demand that needs to be cleared before things make it back to pre-crypto levels.

Additionally, a big sell-off isn't likely amongst those running mining rigs anyway. Falls in currency value aren't going to have that impact. Now if miners start facing increases in marginal cost (say from utilities identifying them and increasing the cost of their electricity) that could potentially lead to a selloff of cards. Likewise, some sort of government crackdown or intervention could lead to that, but you're not going to see people throwing out capital goods with usable life left unless they're abandoning crypto entirely (unlikely without government intervention) or marginal costs rise to the point that it's no longer viable to be completed (which essentially can't occur globally unless the currencies themselves all change their structure or go insolvent).

You seem to not recognize that mining costs electricity. When the price of the tulip bulbs drop below the cost to produce them it's not worthwhile to produce them. If you have a pile of GPUs that cost more to run than they make it does you no good to keep them.

Also the secondary GPU market isn't small, and any distaste for mining cards will just mean they can't be sold for as much, not that they won't sell. Every $100 GTX 1080 is sill a GPU that won't be bought new.

[quote="[url=https://arstechnica.com/civis/viewtopic.php?p=35320493#p35320493]”]1) Used GPUs are always suspect, ESPECIALLY miner cards. You never know how close they are to dying. I’ve had as many GPUs die as I’ve bought and I’ve never mined, so yeah. I’m not gonna buy a miner card; neither will anyone I know.

Miner cards are usually downclocked to tune performance/watt, so I’d rather buy one of them than from a gamer.

Downclocked and run in tightly packed rows of GPUs. Are you suggesting they’re not running hotter than normal GPUs, despite underclocking?[/quote]The lifetime of the GPU chip itself is probably not the main issue too. More likely are the fans and capacitors.

[quote="[url=https://arstechnica.com/civis/viewtopic.php?p=35320493#p35320493]”]1) Used GPUs are always suspect, ESPECIALLY miner cards. You never know how close they are to dying. I’ve had as many GPUs die as I’ve bought and I’ve never mined, so yeah. I’m not gonna buy a miner card; neither will anyone I know.

Miner cards are usually downclocked to tune performance/watt, so I’d rather buy one of them than from a gamer.

Downclocked and run in tightly packed rows of GPUs. Are you suggesting they’re not running hotter than normal GPUs, despite underclocking?[/quote]

Actually, yes, he is suggesting that very thing. Many gaming GPUs, when used for gaming are run in closed boxes, and when gaming hard, hit 80 c. My mining setup is open air, with fans blowing on all the cards, and my cards stay at a constant 60-65 C.

More importantly, though, is that in mining, as I implied, the cards stay at a constant temperature. However, in gaming the cards heat up when used for gaming, and then cool back down when not gaming (and most gaming is not 24/7). It's these temperature fluctuations which cause the most damage, as like anything else, the cards expand and contract as the temp fluctuates.

I doubt, though, that you, or most Arsians, are going to agree here, as the irrational bias against miners and cryptocurrency is highly prevalent on Ars, and in all actuality, is pretty funny to read.

We could start to see them selling the graphics cards they already have on the secondary market. The resulting graphics-card glut could push graphics-card values well below MSRP, which would be great news for gamers but bad news for companies trying to sell new GPUs.

This is taking wishful thinking to absurd extremes. The secondary market for GPUs is extremely small and current "gamers" aren't exactly big on buying cards that were potentially used for mining. There's a ton of pent up demand available to balance out the drop to MSRP and it's not like the pre-crypto market was known for people always paying MSRP. There's a massive amount of demand that needs to be cleared before things make it back to pre-crypto levels.

Additionally, a big sell-off isn't likely amongst those running mining rigs anyway. Falls in currency value aren't going to have that impact. Now if miners start facing increases in marginal cost (say from utilities identifying them and increasing the cost of their electricity) that could potentially lead to a selloff of cards. Likewise, some sort of government crackdown or intervention could lead to that, but you're not going to see people throwing out capital goods with usable life left unless they're abandoning crypto entirely (unlikely without government intervention) or marginal costs rise to the point that it's no longer viable to be completed (which essentially can't occur globally unless the currencies themselves all change their structure or go insolvent).

Blah blah blah, except that that exact same scenario has happened before. With the previous crypto scam mining frenzy.

Even then you claim a currency fall has no impact. Is that because it reduces fees and makes a rig unprofitable to run? I don’t get the arm waving in your argument. Why is it only electricity costs that can drive them out of the business? Why are those magically different from other amounts? Like what makes an electricity dollar different from a revenue dollar or rent dollar, etc?

I wonder if this will all repeat again when the new cards come out. Today a $300 160watt GTX1060 can only do X number of hashes, but what about next year's $300 160watt GTX1160 that can do 2X hashes? Suddenly the ROI on new cards is worth it again.

We could start to see them selling the graphics cards they already have on the secondary market. The resulting graphics-card glut could push graphics-card values well below MSRP, which would be great news for gamers but bad news for companies trying to sell new GPUs.

This is taking wishful thinking to absurd extremes. The secondary market for GPUs is extremely small

Is it? I'm in the market for a new-to-me GPU to do some hobbyist-level machine learning stuff at home. I've been watching Craigslist and the market for used GPUs seems very active in my area. Cards get posted at above MSRP and are gone (presumably sold) after a day or two. Where are you getting your information that the secondary market for GPUs is small?

Quote:

... and current "gamers" aren't exactly big on buying cards that were potentially used for mining. There's a ton of pent up demand available to balance out the drop to MSRP and it's not like the pre-crypto market was known for people always paying MSRP. There's a massive amount of demand that needs to be cleared before things make it back to pre-crypto levels.

Why not? If miners have to spend $2 to get $1 of value in cryptocurrency, what in god's name would make them keep doing that? Why wouldn't they sell their cards at that point? What do you think they'd do instead, keep mining and losing money? Store the cards in their basement and wait for them to depreciate while doing nothing?

Crypto Currency, BECAUSE CLIMATE CHANGE IS NOT REAL, SO LETS BURN A BUNCH OF FOSSIL FUELS SO WE CAN HAVE 1000W MINING RIGS RUNNING 24/7, SO WE CAN HAVE A DIGITAL CURRENCY...

BECAUSE TURNING ELECTRICITY INTO CURRENCY IS SUCH A GREAT IDEA!

How did we get to this place? A place where most people understand that electricity usage almost always has a negative effect on our environment, but then are supporting using massive amounts of electricity to create work to create value for a digital currency.

A digital currency which quite frankly only criminals have a solid use case for.

Crypto Currency, BECAUSE CLIMATE CHANGE IS NOT REAL, SO LETS BURN A BUNCH OF FOSSIL FUELS SO WE CAN HAVE 1000W MINING RIGS RUNNING 24/7, SO WE CAN HAVE A DIGITAL CURRENCY...

BECAUSE TURNING ELECTRICITY INTO CURRENCY IS SUCH A GREAT IDEA!

How did we get to this place? A place where most people understand that electricity usage almost always has a negative effect on our environment, but then are supporting using massive amounts of electricity to create work to create value for a digital currency.

A digital currency which quite frankly only criminals have a solid use case for.

Serious question, why don’t people make the same environmental argument about games? I mean if mining is bad for the environment, so is gaming ?